The U.S. Court of Appeals for the Seventh Circuit issued a decision January 22, 2026, in *Atlanta Gas Light Company v. Navigators Insurance Company*, resolving a multi-million dollar insurance coverage dispute that arose from a devastating gas line explosion in Homerville, Georgia.
The case originated when Atlanta Gas Light Company and Southern Company Gas (collectively "AGL") hired United States Infrastructure Corporation ("USIC") to locate and mark gas lines throughout Georgia. In 2018, USIC failed to properly mark a gas line in Homerville, Georgia, leading to a boring company striking the unmarked line and causing an explosion that severely injured three women.
The explosion victims initially threatened to sue both AGL and USIC. In 2019, all parties participated in a pre-suit mediation process aimed at resolving the dispute without litigation. During this mediation, the victims successfully reached a settlement agreement with USIC, but were unable to come to terms with AGL at that time.
The victims subsequently filed lawsuits against AGL in Georgia state court, referred to in the court documents as the "Underlying Suits." Facing this litigation, AGL eventually reached its own settlement with the injured women, but only after the formal legal proceedings had begun.
The insurance coverage dispute centered on AGL's service agreement with USIC, which required USIC to obtain both primary and excess liability insurance coverage that included AGL as an additional insured party. When USIC's settlement with the explosion victims exhausted its primary insurance policy, AGL sought coverage under USIC's excess insurance policy.
AGL tendered requests to Navigators Insurance Company, USIC's excess insurer, seeking both defense and indemnification for the underlying lawsuits. However, Navigators denied these requests, arguing that AGL was not covered as an "additional insured" under the excess policy.
Navigators's denial was based on its interpretation that the underlying lawsuits were premised solely on AGL's conduct, rather than on USIC's actions or failures. This distinction was crucial because additional insured coverage typically applies only when the additional insured's liability stems from the named insured's operations or conduct.
Frustrated by Navigators's refusal to provide coverage, AGL filed suit in the U.S. District Court for the Southern District of Indiana against the excess insurer. AGL's complaint alleged multiple claims against Navigators, including breach of contract, breach of fiduciary duty, and breach of the insurer's duty to defend.
The case proceeded through the federal district court system, with Judge James P. Hanlon presiding over the matter in the Indianapolis Division. The district court's initial ruling apparently favored one party sufficiently that both sides appealed different aspects of the decision to the Seventh Circuit.
The appeals, designated as case numbers 24-2888 and 24-2889, were consolidated for review by a three-judge panel consisting of Circuit Judges Diane S. Sykes, Candace Jackson-Akiwumi, and John Lee. The case was argued before the panel on September 5, 2025.
Circuit Judge Lee authored the opinion for the court, which was decided January 22, 2026. The decision addresses the complex interplay between additional insured coverage, the duty to defend, and the specific language of excess insurance policies.
This case highlights the ongoing challenges in insurance coverage disputes involving additional insured provisions, particularly in the context of service agreements between companies and their contractors. The outcome will likely influence how courts interpret similar additional insured coverage disputes in the future.
The decision also underscores the importance of clear contractual language in service agreements regarding insurance coverage requirements. Companies that require contractors to name them as additional insureds must ensure that the policy language actually provides the intended coverage.
For the insurance industry, the ruling provides guidance on how courts will analyze coverage disputes involving additional insured provisions in excess policies. The decision may influence how insurers draft policy language and handle coverage determinations in similar situations.
The case demonstrates the potential financial exposure companies face when contractor negligence leads to accidents. The original gas line explosion resulted in serious injuries to three women, leading to substantial settlement costs that prompted this multi-year insurance coverage litigation.
Both AGL and Navigators filed cross-appeals in the case, suggesting that each party achieved partial success at the district court level but sought to overturn aspects of the lower court's ruling that favored their opponent.
The Seventh Circuit's decision in this matter will be closely watched by companies in the energy sector, insurance carriers, and legal practitioners who regularly handle additional insured coverage disputes. The ruling provides important precedent for similar cases involving contractor relationships and insurance coverage obligations in the Seventh Circuit's jurisdiction, which includes Illinois, Indiana, and Wisconsin.